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Salesforce.com Inc. Acquires Koral Inc. April 10, 2007

The Companies
San Francisco-based Salesforce.com is a provider of customer relationship management (CRM) applications available on the Web through a Software as a Service (SaaS) model. The publicly held company accrued $497 million in revenues in its 2007 fiscal year, which ended Jan. 31. As of January, Salesforce.com claimed nearly 30,000 companies and 650,000 users as subscribers.

Koral Inc., of San Mateo, Calif., delivers content-management applications. The company, founded by former CEO Mark Suster, now vice president for Salesforce Content at Salesforce.com, launched in September 2006. Salesforce.com retained Koral's entire nine-person staff.

Salesforce.com announced the acquisition on April 10. Financial terms were not disclosed.

The Technology
Salesforce Content, the new application based on Koral's technology, will consist of two components: Apex Content and Salesforce ContentExchange.

Apex Content is a development platform. With it, developers can create applications allowing users to manage and share content in a Web-based SaaS environment. Apex Content provides a platform for developing applications for managing "unstructured" data -- that is, information such as documents, video files and e-mail that resides on servers or desktops rather than in databases.

Salesforce ContentExchange, built on the Apex Content platform, lets users manage and exchange unstructured data. With ContentExchange, for example, users will be able to find information such as sales proposals, résumés and training videos located throughout their companies or have such content "pushed" to them in a manner similar to an RSS feed.

"The collaborative tool of choice is e-mail, and that's a problem," Suster says. "It's not a managed tool. Your corporate knowledge ends up sitting on people's laptops or on the LAN. [ContentExchange] can marry structured data, which is all the information about my CRM account, with unstructured data [and] present me with a list of content produced by my colleagues around the world."

The Competitive Landscape
Salesforce.com is aiming ContentExchange "squarely at SharePoint," says Bruce Francis, the company's vice president of corporate strategy, referring to Microsoft's technology for tying together front-end and back-end applications and data within the Microsoft technology stack. Francis sees an opportunity to gain market share in the content-management space by attacking what he calls a classic Microsoft application "that's owned by millions, used by few and loved by none."

The Channel
Partners can build customized content-management applications, particularly for vertical industries, based on the new Koral technologies through Salesforce.com's AppExchange, Francis says. AppExchange is a directory of on-demand SaaS applications built by Salesforce.com partners.

Currently, AppExchange has 575 applications. Francis says: "It's our vision to take that to the thousands and beyond. We want to [make] every partner on AppExchange as successful [as] or more successful than Salesforce.com."

The Analysis
"What sets Koral apart from other collaboration tools I've come across is ease of use," Jason Wood, principal and head of research for RT Capital Management Inc., a New

York-based investment manager, writes in an April 18 entry of his blog, The Ponderings of Woodrow. "The reason [Salesforce.com] enjoyed such tremendous uptake in [sales force automation] isn't because it's got a richer feature set or is less expensive than traditional CRM. The reason it's been deployed is because it's easy to configure and intuitive ... Koral does for unstructured content management what Salesforce has done for traditional SFA process management."

Wood, who calls the acquisition "significant," believes that the Koral acquisition will serve to expand Salesforce.com's market opportunity.

About the Author

Lee Pender is Redmond Channel Partner magazine's senior editor. You can reach him at lpender@rcpmag.com.